From the monthly archives:

March 2009

Choosing a registered financial adviser – one step in fraud prevention

by admin on March 20, 2009

in Fraud Prevention, Working with an Adviser

An estimated 72,000 Canadians were victims of investment fraud in 2007.

Atlantic Canadians are more likely than the average Canadian to be approached with a fraudulent investment, according to research conducted by the Canadian Securities Administrators in 2006.  Atlantic Canadians are also much less likely to believe that investment fraud is a problem in their province.

Nova Scotians have a reputation for friendliness and hospitality. Does this put us at increased risk for fraud? Are we simply too trusting? Perhaps there are times when we should worry less about being rude and just close the door, hang up the phone, or delete the email.

Many of us rely heavily on the recommendations of advisers, family and friends when it comes to our investment decisions.  If the people we put our trust in are not acting in our best interest, this can have disastrous consequences for our finances. Who would you prefer handling your future – someone with your best interest in mind, or their own?

The key to avoiding investment fraud is to deal with a registered and reputable adviser. Anyone selling securities (investments) in Nova Scotia is required to be registered with the Nova Scotia Securities Commission (unless they qualify for an exemption, which you can verify by contacting the commission). Firms and individuals can only register with the commission if they are properly qualified.

How do you find YOUR adviser?

Ask for referrals from friends, family or work associates, but never assume that who’s right for them is right for you.  Make a list of potential candidates. Call them, and screen over the telephone. Ask potential advisers for references who you can follow up with.

You can check an adviser’s registration with the Nova Scotia Securities Commission. You can also search our enforcement proceedings online, for any past litigation.  The Better Business Bureau can tell you if they have a history of complaints against an adviser.

Choose an adviser who has the necessary qualifications and experience, who is registered with your local securities regulator and who you believe is trustworthy. Just as important is choosing someone you are comfortable with. Trust your judgment about whether a candidate will listen to and answer your questions.

Don’t be afraid to make a change if it becomes clear your first choice was not the right one or if your needs change. Account transfer fees can often be waived, and in any case are a small price to pay for peace of mind.

This post featured in Carnival of Pecuniary Delights, Edition 21, August 27, 2009.

Tagged as: advisers, fraud, registration

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Beware of RRSP Fraud

by admin on March 17, 2009

in Red Flags of Fraud

The economy is suffering, and people everywhere are looking for ways to stretch their money a little further. So are the scam artists, and their plan is to use your concerns about the economy to trick you into false investments.

Consider this scenario:

John recently retired, and in the past year has seen his retirement savings reduced significantly. He has been forced to rethink his retirement plans and may need to downsize into a smaller home to cut costs.

After reading an ad in the local newspaper, John contacted the “Custom Financing Centre,” a firm offering financial assistance to holders of RRSPs and other registered plans. He was told that he could withdraw money from his RRSP without paying tax. This looked like a very attractive offer!

A simple scheme was proposed to him:

  • Use the amount accumulated in his RRSP to buy shares of an “RRSP eligible” company. Then, obtain a loan equivalent to 80% of the RRSP, which could be used as he saw fit.

Since this was an exceptional offer, it was only available for a limited time. John didn’t take much time to think it through, lest he miss his chance.

Remember, when it sounds too good to be true, it probably is. Don’t give in to pressure to invest.

John finally understood this, but it cost him dearly:

  • The shares he purchased were worthless. He therefore lost his entire RRSP because the “RRSP eligible” company in which he invested did not exist.The shares were not RRSP eligible, despite what he had been told.
  • He thus could not withdraw money from his RRSP without paying tax and he received notices of assessment from the provincial and federal governments. He was now obliged to pay tax on all the money withdrawn from his RRSP, plus interest and substantial penalties for infringing the rules.

RRSP schemes like this one were seen during the last economic downturn in the 1990’s and are starting to pop up again. Be careful.

The lessons to be learned:

Before you invest, ensure that the dealer and the dealer’s representative are registered with Nova Scotia Securities Commission;

  • Make sure the company that issued the shares (or the securities) has filed a prospectus with the Nova Scotia Securities Commission;
  • f the investment is being sold as an exempt security, make sure you understand the exemption, and that you qualify for it;
  • Never take it for granted that the person you are dealing with is telling the truth.

Tagged as: fraud, RRSP fraud

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Investment Spam

March 5, 2009

We all get them. Spam email telling us about the latest hot stocks. Most are easy to delete and ignore, but others are well done. A company logo, links to a website. They look and sound legitimate. After all, everyone is on the internet these days, so would investment advisers be using it too?
Maybe, but [...]

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